phone was stuck in recovery mode with bad power button.
I replaced the power button harness and tried to restore, with tiny umbrella, to the 4.2 fw that the phone was running. Kept getting an error 21.

I restored to stock 5.0.1
When it goes through activation I get an unsupported sim message. I get this whether using iTunes or trying with wifi. I tried many sims with same result. If I jailbreak with redsnow I do not get the error but I do get "no service".
I tried active sims from at&t, tmobile & spot mobile (t-mo mnvo) with same result. I thought I would get an incorrect sim from the T-Mo sim but I do not.

That baseband that you're on 5.16, isn't able to be unlocked with ultrasn0w, you would need to update your iPhone's baseband to 6.15.00, using redsn0w 0.9.15b5c. DO NOT UPDATE IF YOUR IPHONE IS NEWER, MADE IN 2011. Just a warning.